Non-Farm Payroll Trading Strategy (Backtest)

In this video, we delve into the NFP (Non-Farm Payrolls) trading strategy and show you how to trade it. The Non-Farm Payrolls are typically published on the first Friday of every month, and we explore whether you can make money on the NFP numbers.

We begin by discussing how stocks and bonds typically react when the NFP numbers are released, which is before the official trading begins. We then backtest the performance from the open to the close for the S&P 500 on the day the report is published, using the ETF with the ticker code SPY.

We buy at the open and sell at the close, and find that the average gain is 0.06%. However, the return on any random day is zero, so while the S&P 500 performs better, it's not tradable due to small and erratic gains.

Next, we switch to bonds (long-term Treasury bonds – TLT) and find that bonds drop in value from the open to the close, with a -0.03% return. However, this is not a tradable short strategy as the gains are too small and erratic.

We also examine the performance in the days after the report by buying S&P 500 on the close of the Friday of the report and selling N-days later. The results are pretty random, with lower returns compared to random periods.

Finally, we look at bonds again and find that bonds show negative returns if you exit on any day up to five days after the report. In conclusion, it seems that both stocks and bonds perform more or less randomly after the NFP report is published.

If you want to learn more about the NFP trading strategy and how to trade it, be sure to watch this video. Don't forget to like and subscribe to our channel for more free trade ideas like the ones we provided in this video.

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You can read more about it here:
https://www.quantifiedstrategies.com/nfp-trading-strategy

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